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Source link: http://archive.mises.org/4398/printing-money-is-only-legal-when-we-do-it-hasbro-edition/

Printing Money Is Only Legal When We Do It: Hasbro Edition

December 4, 2005 by

The benevolent creators of Monopoly have created an easy-to-use process to print additional money for use in its popular game, to wit:

The more money you have, the easier it is to own it all – so print your own! Just click on the image of the money you want to find a whole page-full.

Among the myriad of Mises.org articles discussing this issue, I find the following example the pithiest in illustrating the root problem in printing fiat money (as the Federal Reserve, among others, does):

In a market economy, money enables the goods of one specialist to be exchanged for the goods of another specialist. For instance John the baker has produced ten loaves of bread, which he has exchanged for ten dollars. He then uses the ten dollars to buy twenty tomatoes from a farmer Bob. Note that in order to acquire twenty tomatoes John had to produce ten loaves of bread first. In short, his consumption of tomatoes is fully backed up by the production of bread. Also, note that the money here is honestly earned and hence fully backed up by John’s production of bread. Or we may also say that here we have a case where something useful is exchanged for money and money in turn is exchanged for some other useful thing—something is exchanged for something else by means of money.

Let us now consider a case of a counterfeiter—call him Charlie—who instead of producing something useful has created ten dollars by means of printing these ten dollars. He then uses these dollars to buy twenty tomatoes from Bob the farmer. His counterfeiting amounts to an “exchange” of nothing (since Charlie hasn’t produced anything economically useful) for ten dollars, which is in turn exchanged for twenty tomatoes.

Consequently, by means of money, which was created out of “thin air,” Charlie the counterfeiter can consume without any production. Note that the money here, which was created out of “thin air,” is not supported by any production of useful goods or services. Or we can also say that here we have a case where nothing useful is exchanged for money and money is exchanged for useful things—nothing is exchanged for something useful by means of money out of “thin air.”

By creating money out of “thin air,” Charlie the counterfeiter has in fact boosted or inflated the stock of money. This inflation of money in turn has enabled Charlie to secure tomatoes at the expense of a genuine wealth producer John the baker. In other words, while John the baker has contributed to the pool of funding, i.e., the pool of final goods this is not the case as far as Charlie the counterfeiter is concerned—he is consuming final goods without putting anything useful to the pool of these goods.

More: 1 2 3 4 5 6 7 8 9

See also: Parker Bros. Replaces Monopoly Money With Cheaper Euro


Aakash December 4, 2005 at 5:55 pm

No wonder that this game is despised by leftists (and banned in certain countries)!

Tim, et al.: This is off topic, but I don’t think you’ll mind… I wanted to let you know that the Mises Economics Blog has been selected as a finalist for this year’s annual Weblog Awards Contest. I got the idea to nominate it after I saw that someone had nominated the ‘Club for Growth’ weblog, and I thought that yours should be there too.

When this Contest first began in 2003, I nominated the Antiwar.com Blog, and it was selected as a finalist (though not this year, when I did so again). That blog, then as now, did not allow for posting comments, so I e-mailed them, letting them know, and they did the customary post, that finalists chosen for the ballot typically do. (Other blogs I nominted that year were also picked as finalists, and did likewise.)

Going over to Patterico’s Pontifications…

Good luck in the contest!

(Voting begins tomorrow…)

Steve December 5, 2005 at 12:35 am

It’s funny how so many articles on the wonderful Mises.org site rant and rail about the evils of paper money. While I agree about the pitfalls of paper money, it’s not very relevant in this age of digital money. I get my virtual paycheck deposited straight into my bank account these days. I electronically file my taxes. Where is the “printed” money? It’s just not there anymore like it used to be back in the day. I make far more purchases with my debit card than with cash. And for some of my bills, I still pay by old fashioned checks. The only paper money that I use is for odds and ends purchases at convenience stores.

Now, the only question I have is where does digital money fit in the economic equation? At first thought, it would seem unlikely that digital money could be inflated by “printing” more of it.
But then again, I’m no expert.

Paul Edwards December 5, 2005 at 1:31 am


While it is true that we use checks and plastic more than federal reserve notes these days, the concepts are all the same, and the problem of “paper money” still applies perfectly. The problem isn’t so much inflation of paper money, these days, but simply inflation of money: i.e. bank deposits. The term “paper” is used to distinguish our system of money to a more sound gold or commodity money of the old days.

When the fed inflates, it does it by writing a check against itself to buy treasury securities on the open market. This increases banking reserves in the form of banks’ deposits with the fed. When the banking industry inflates on top of this, it does so by increasing bank deposits while issuing new credit to borrowers. Its called bank credit expansion. It means that more people have more bank deposits than before and these deposits came from thin air. This is how inflation occurs these days. It’s not quite the same as physically printing all these new bank notes, but it is the same thing economically.

George Gaskell December 5, 2005 at 8:56 am

Steve, the digital transfers and electronic balances that you refer to only have value in the market because they are ultimately redeemable in paper money. Digital money is easier to move and is more secure, but ultimately it is just a proxy for paper.

Paper started out as a convenient proxy for real commodity money (typically gold). Before central banking, all paper money had value only because it was ultimately redeemable in bullion. Our (US) paper money once declared as much on its face. They even had special bills that were redeemable in silver rather than gold (Silver Certificates).

Over the 20th century, after people had become used to using only paper and rarely, if ever, actually seeing bullion, the government (through a long series of usurpations and manipulations) simply declared that the paper stood for itself. It is redeemable in nothing except more paper.

In other words, fiat money can take any form. The important feature of today’s banking system is not that it uses paper, or electronic digits, or … I don’t know, plastic poker chips. What matters is that the Federal Reserve is the one that decides how many of these credits are in circulation, who first gets them, at what interest rate, etc.

Banks may rarely deal in paper bills, but ultimately, the credits they get from the Fed are limited only by the number of credits the Fed wants to grant. The form of the money means nothing; the fact that the Fed has control over the monetary system (in whatever form that money is expressed) is what matters.

Ryan Taylor December 8, 2005 at 12:30 pm

Wouldn’t it be fascinating to alter the game of Monopoly to include a Federal Reserve that artifically alters the money supply based on the economic progress of the game? No one is buying enough properties? Lower the mortgage rates and print up more money! Things getting overheated? Raise those rates and contract the money supply! Create your own boom and bust!

A player can be designated the Fed Chief. Just for kicks, he could fly a toy helicopter around the board and drop Monopoly money into each player’s lap!

DavidB June 21, 2007 at 12:00 am

Actually Ryan what should be done is someone should come up with a game that allows for a central banker to control all aspects of an economic scenario. That would be a great way to teach kids what a fraud the Fed system is. I think a good format would be to have one Fed member, one banker and then all the other members could open any business they wanted to. Then they could learn how a banker can inflate money and be in collusion with the fed. Of course the game probably wouldn’t be very fun because the banker would always win once he figured out the system.

Mises could market the thing on it’s site. It would probably sell fast once people ‘got it’

Even better would be a computer game version. Or has one already been created?

I doubt the big games houses would distribute or manufacture it though. The inventor would probably have to go independent and market the thing himself. I would hope Mises would support a project like that

onyi June 22, 2008 at 10:51 am








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